Q. Macro-economics is perhaps most divisive area of economics when functionalized to political decision making, also macro-economists divide themselves into different schools of contemplation. Two biggest camps are the Keynesians and the Monetarists. Keynesians and post-Keynesians follow the theories of John Maynard Keynes, the most-celebrated economist of the 20th century who proposed that government stabilize the economy with the use of fiscal policy. Monetarists, on another side follow teachings of Friedrich Hayek. For this project do some research on ideas of Keynes and Hayek? Focus on the "big picture" of what their major ideas are and how they have influenced policy makers. Then write a 4 to 5 page paper addressing the following questions:
1. a. Discuss the policies that Keynes as well as Hayek supported regarding how federal government ought to manage economy. What are differences between each school of thought?
b. Based on your answer to question #1a, which of 2 economists you agree with most? Explain.
2. Read Case in Point 3: Steering on a Difficult Course in section 17.3 of the online text (link here).
a. Why did people believe the difficulties Asian economies were experiencing in 1997-1998 might bring a recessionary gap to the United States?
b. In dealing with the recession of 2008 why is it important for the Fed and Congress to coordinate monetary and fiscal policy measures?
3. Compare the rationale of the Reagan administration for the 1981 tax reductions with the rationale behind the Kennedy-Johnson tax cut of 1964, the Bush tax cut of 2001, and the Bush tax cut of 2003.